Crude Oil – Weekly Analysis, 13/08

Aug 13, 4:32 am
Crude Oil_1703

Crude Oil continues to fall but a correction is around the corner

Crude oil prices continued to remain weak shedding over -1% for the week to date. Prices were seen trading near the lows of 42.80, a 5-month low despite the weekly EIA Crude oil inventories showing the US commercial stockpiles decreasing by 1.7 million barrels last week. However the total US commercial crude oil stock piles remains elevated at 80 year highs.

For the last week ending August 7th, Crude oil inventories fell 847k barrels against estimated 1.9 million decrease. With supply continuing to be elevated more than the demand, Crude oil prices remain under pressure. Further to the Crude oil dynamics, the stronger US Dollar is also putting further pressure on the commodity. It is likely that supply could further strengthen once the Iran nuclear deal is sealed which will open up the country’s oil supplies to the international markets.

Crude Oil Technical Analysis

Starting with weekly charts, Crude oil has been declining consistently for the past 6 weeks from the highs of 58.90 to trade near the current levels of 43.22. The median line plotted on the weekly chart shows that Crude oil is currently trading near the support level just above the lows of 15th March, 2015 at 42.03. We expect to see some correction that is overdue to this decline with the potential resistance at 49.15 and 53 – 54 region on the weekly chart.

Crude Oil Weekly Chart, 13/08
Crude Oil Weekly Chart, 13/08

On the daily chart, price action is clearly trading in the support zone identified between 44.76 and 42.39 region. We could expect some consolidation to take place in this region before any corrective break out. The daily charts shows the upper resistance level between 47.81 – 47.28 which could be the first level to target on any corrective bounces off the current lows. There are also further resistance levels above the 47.81 levels.

Crude Oil – Daily Chart, 13/08
Crude Oil – Daily Chart, 13/08

On the 4-hour chart time frame, we are noticing that the current declines are not being confirmed by the RSI as the bullish divergence is continuing to build up. We notice a minor resistance at 43.86 – 43.85 region. A break above this level and potentially establishing support here could see the start of the correction that will possibly see Crude Oil rally towards $51.30 level of support eventually. Ahead of the correction to $51, we expect the minor resistance levels near 46.3 – 47 being the initial point of target for the correction.

Crude Oil H4 Chart – RSI Bullish Divergence
Crude Oil H4 Chart – RSI Bullish Divergence

For the week ahead, the only major impacting news is that of today’s US retail sales data and the FOMC meeting minutes due for release next week which could impact the prices of Crude oil from a US Dollar perspective.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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